Facebook takes a punch in the gut as car giant GM pulls advertising

In a blow to Facebook's hype days before its IPO, American car giant General Motors has decided to stop advertising on the social network.

A blow to the stomach

GM marketing executives determined their paid ads had "little impact on consumers", according to the Wall Street Journal, quoting "people familiar with the matter".

The WSJ says the news comes at a bad time for Facebook, expected to hold a historic initial public offering on Friday.

Further, "the move comes as more companies "question the effectiveness of advertising on the social networking site", said the WSJ. That remark will even further dampen expectations for the IPO.

GM, America's third largest advertiser , says it will, however, still expand its use of marketing through Facebook's pages. Hold the sigh of relief !.

GM marketing chief Joel Ewanick said they were "i definitely reassessing our advertising on Facebook, although the content is effective and important."

"Content" refers to the unpaid Facebook pages that many companies use to promote their products.

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Facebook executives have spent the last two weeks "trying to convince investors that its advertising business makes it worthy of a $105 billion valuation," said the Journal.

Earlier this year GM's marketers began to question the effectiveness of the ads. After meeting Facebook managers, they are said to have left "unconvinced that advertising on the website made sense."

GM spends about $40 million on its Facebook presence. About $10 million is paid to Facebook for advertising; the rest covers "content" (that word again!) created for the site.

GM's $10 million ad spend is tiny compared with Facebook's $3.7 billion in revenue. But the worry is: Will more big advertisers follow?

Some have already said they find it very difficult to measure the effectiveness of Facebook ads.

Nate Elliot, an analyst at research firm Forrester, in a blog post said, "Companies in industries from consumer electronics to financial services tell us they're no longer sure Facebook is the best place to dedicate their social marketing budget."